Navy weighs $8B Osprey pact

WASHINGTON — The U.S. Navy is considering buying another 122 V-22 Ospreys from a joint Bell-Boeing partnership for about $8 billion.

The proposed contract, now in its early stages, would supply the aircraft to the U.S. Marine Corps and U.S. Air Force through 2017 — renewing a current deal for five more years.

Bell Helicopter employs more than 1,000 people — and plans this year to hire 140 more — in Amarillo, where workers assemble Ospreys and utility and attack helicopters.

The jobs impact was uncertain, but a renewed deal would stabilize the work force at the local Bell plant over the term of the contract, officials said.

Textron of Providence, R.I., and Boeing of Chicago are in the last year of a four-year, $10.9-billion contract for 174 aircraft. Textron’s Bell Helicopter unit and Boeing have submitted a new request for proposals, officials said.

Bell-Boeing V-22 spokesman Andy Lee said the companies are not releasing the potential value of the contract or cost-savings projections while Navy officials evaluate the proposal. But he said company officials project that the proposal would save the Navy money.

“This contract would fortify the program of record that we have been aiming for some time,” he said. “It provides certainty to the industry, so as an industry we can plan …We can achieve economies of scale with our supplier base.”

The Navy declined to speculate the potential value of the deal. At the current basic “flyaway” cost of $65 million apiece for the aircraft, the new contract could approach $8 billion.

“We have asked for a proposal,” said Navy Assistant Secretary for Acquisition Sean Stackley, who said the Navy wants a multiyear contract. “We are just at that point.”

“I have had discussions with them to outline what a multi-year would look like,” he said. “We want to get to a multiyear. We think it’s important to get the savings. We are at the very front end.”

Pentagon weapons buyer Ashton Carter, whom President Barack Obama is nominating to the No. 2 Defense Department post, has listed increased use of multiyear contracts as a key tool for driving down procurement costs.

In this case, the Navy and contractor must develop reliable data allowing the service to certify to senior Pentagon officials that a five-year block buy can save at least 10 percent over annual batch purchases.

Signing a multiyear contract also virtually guarantees those aircraft can’t be canceled because the military would face steep termination costs.

“Multiyear buying certainly saves money. And if a contract doesn’t save money, the Pentagon doesn’t do it,” said Rep. Mac Thornberry, R- Clarendon. “As we get more V-22s out in the world, the need to maintain, repair and replace the aircraft increases. ... I’m hopeful that Bell-Boeing and the Navy can work something out.”

Richard Aboulafia, an aircraft industry analyst, said the time is ripe for defense contractors to get contracts approved before defense budget cuts are approved. Future defense budgets, he said, are likely to be significantly leaner.

“The odds are pretty good that it’ll get approved,” he said. “This might be coming in under the wire. It’s essential to get this signed while the money is still there.

“Once you get a multiyear procurement contract signed, it’s pretty much impossible to stop.”

Aboulafia said the V-22 program is costly but has survived early criticism over safety.

“It’s a very expensive but very capable form of a military lift. Getting replacement lifters in service is a high priority,” he said. “I don’t think there’s a debate anymore about its safety. There is still a debate about its expense.”

Stackley said the intent is to validate savings so that by next April or May, “we can go forward with certification after” the fiscal 2013 budget is submitted.

A contract potentially could be signed in December 2012, said Renee Hatcher, a spokeswoman for the Naval Air Systems Command.

The additional purchases would complete the Marine Corps and Air Force plan to field 410 V-22 aircraft. The Navy has a requirement for a separate 48 that might be purchased after 2018, she said.

Lt. Gen. Terry Robling, the Marine Corps deputy commandant for aviation, said “it looks good. Bell-Boeing says they can achieve the 10 percent that is required and a little bit more than that.”

Congress has approved spending $35 billion through December on the $53.2-billion program.

The program was approved for full production in September 2005 after four years of additional development to demonstrate that the aircraft had overcome a host of deficiencies, including problems with its design, safety and reliability, all uncovered after two crashes in 2000 killed 23 Marines.

The Osprey has been deployed in Iraq and Afghanistan. One of the crafts ferried Osama bin Laden’s body to the aircraft carrier USS Carl Vinson after he was killed in a U.S. raid May 2 in Pakistan.

The House Appropriations Committee in June said the aircraft’s overall performance “has laid to rest all doubts” about its combat effectiveness.”

Breaking News Editor Jim McBride can be reached at jim.mcbride@amarillo.com. Night Editor Mark Haslett can be reached at mark.haslett@amarillo.com.

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